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WASHINGTON -- The number of Americans filing new claims for unemployment benefits fell for the second consecutive week last week, suggesting a sharp step-down in job growth in December was likely to be temporary.

Even as the economy gathers steam there is little sign of a broad pick-up in prices, keeping inflation pressures muted.

"The outlook for 2014 remains good. The economy is not generating much inflation at the moment, but this is no reason to doubt its vitality," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.

Initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 326,000, the Labor Department said. That compared to economists' expectations for a fall to 328,000.

Job growth slowed sharply in December, with employers adding only 74,000 new jobs to their payrolls. Nonfarm payrolls had increased 241,000 in November and the retreat last month was blamed on cold weather.

In a separate report,

the Philadelphia Federal Reserve Bank said its business activity index rose to 9.4 points this month from 6.4 in December. Any reading above zero indicates manufacturing expansion in the region, which includes factories in eastern Pennsylvania, southern New Jersey and Delaware.

A gauge of factory employment surged this month, but workers had fewer hours on average. There also was a slowdown in new orders.

In anther report, the Labor Department said its Consumer Price Index increased 0.3 percent after being flat in November. In the 12 months to December, consumer prices accelerated 1.5 percent after advancing 1.2 percent in November.

The increases were in line with economist expectations.

Low Interest Rate Bias

Stripping out the volatile energy and food components, the so-called core CPI rose only 0.1 percent, slowing from a 0.2 percent gain in November.

That left its increase over the past 12 months at 1.7 percent, where it has now been for four consecutive months.

The Fed targets 2 percent inflation, although it tracks a gauge that tends to run a bit below CPI.

The U.S. central bank has started reducing the pace of its monthly bond purchases, but persistently low inflation is expected to see it hold interest rates near zero for a long time even if the jobs market picks up significantly.

Slack in the jobs market, which has seen small gains in wages, is keeping the lid on inflation. Even as the economy accelerates, wage growth is expected to lag, meaning inflation is likely to only gradually increase this year.

"We continue to expect the Fed to remain biased towards a lower policy rate theme for even longer, though they will continue to pursue the current unwinding of bond purchases, which we expect to be completed late this year," said Millan Mulraine, deputy chief economist at TD Securities (TD) in New York.

A 3.1 percent increase in gas prices was mostly behind the spike in inflation last month. The increase in gasoline was the largest since June and followed a 1.6 percent fall in November. Food prices nudged up 0.1 percent, rising by the same margin for a third month.

Within the core CPI, apparel prices rose 0.9 percent, also the largest gain since June. Apparel prices had declined for three consecutive months.

that is a joke, The goverment has so much GAS in reserve.It will last a Hundred years. OUR GOVERMENT IS EXTORTING SO MUCH FROM THE PEOPLE IT IS NOT FUNNY. AND WE ARE LETTING THEM DO IT. THAT SHOW HOW STUPID WE ARE. CAN WE STOP IT . WE PUT THEM THERE, WE SHOULD BE ABLE TO TAKE THEM BACK OUT OF OFFICE. BE NICE IF WE DID NOT HAVE IT LOOK SO MUCH LIKE LATE GERMANY, OR, IT SEEM TO BE TURNING TO NOT BE FREEDOM, BUT SOMETHING ELSE. HIGH PRICES, NO JOBS, WE ARE DOGS IN A CAGE, YOU CANT DO THIS NO NO BAD DOG, WOOPS, I MEAN PEOPLE YOU KNOW WE ARE DOING OUR BEST WE CAN, GIVE US A CHANSE TO CHANGE IT, WE ARE NOT THE LAND OF THE FREE,

"Food prices nudged up 0.1% ... prices for prescription drugs fell 0.9%". What alternate universe are these number crunchers living in????

Ask anyone you know, who requires constant Rx meds to tell you when was the last time they saw a decrease in the cost of those. (I bet they can't remember that far back --- if it has ever happened, at all.) And food prices "only" increased 0.1%. That's a flat-out lie.

I often wonder "where" these so-called "economic experts" are shopping at --- to arrive at these phony numbers. It sure can't be the same grocery stores, drug stores, and gas stations that the rest of us are going to.